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Digm Piece (Op-Ed)

How Starting a Family Ruined My Finances

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Wait… Wait… I know what you’re thinking. How can this guy be writing an article about something as precious as his family, but sound so insensitive in the title? What does he mean that starting a family ruined his finances? Surely there has to be a positive angle when talking about family finances.

Let Me Explain

First and foremost, starting a family is one of the best things that has ever happened to me in my life and anyone who has experienced being a parent will tell you how much joy parenting really is—up to a certain point. The truth of the matter is that children are blessings and can change your life for the better, but unfortunately they can also change your wallet in the opposite direction if you aren’t properly prepared.

Love Is in the Air

My wife and I met over 15 years ago and it was love at first sight. Well, maybe not exactly—I had to convince and woo her a little, but she eventually made the right choice and fell to my charm (or my unwavering persistence). We had a great time dating and rarely discussed starting a family because we were enjoying our lives, careers, and looked forward to more world traveling. After five years of dating, we decided to get married and wasted no time starting a family thereafter. My daughter was born approximately 11 months after our nuptials and this was one of the best days of our lives. We enjoyed our new family immensely, but soon after we were hit with the reality of parenting and raising a young child.

Love Didn’t Pay the Bills

Bills started to pile up immediately and we were left with many tough decisions to make as it related to our priorities. Were we going to pay our medical bills first or use our cash to buy clothing and diapers? Could we afford child care or should one of us stay home? Was it time to pick up a second job or was there another way to bring in more income? The fact that it is expensive to start a family set in pretty quickly.

Love Lowered Our Credit Scores

After months of robbing Peter to pay Paul, we were almost maxed out on our credit cards in an attempt to make ends meet. We watched our credit scores closely and noticed that these high credit card balances had taken a toll on our score, dropping it almost 30 points in a short amount of time. We learned that overuse of our credit cards had taken us way over the recommended maximum utilization ratio of 30 percent.

Love (and a Little Discipline) Fixed It All

Immediately, we started to budget our expenses and focus on our needs rather than our wants. We tightened our belts a little and by doing so we were able to pay down our debt and get our score back on track. We also started to pay ourselves first and created an emergency fund with a high-yield savings account in order to prevent ourselves from being dependent on credit. We focused on our needs and budgeted for the wants, and before we knew it, our ruined finances became a walk in the park of family finances.

The Lovely Conclusion

Starting a family is still our greatest accomplishment, but turning our family finances around is a close second. Never underestimate the power of planning, but also don’t beat yourself up if life throws you lemons—or babies for that matter. Now at child number two, my family finances are growing and what seemed as an out of control situation was put back in order with a little planning and discipline.

Do you have any financial comeback stories? I would love to hear them below.

 

Ash Exantus aka Ash Cash is one of the nation’s top personal finance experts. Dubbed as the Financial Motivator, he uses a culturally responsive approach in teaching financial literacy. He is the Head of Financial Education at BankMobile and Editor-in-Chief at Paradigm Money. The views and opinions expressed are those of Ash Cash and not the views of BankMobile and/or its affiliates.

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Digm Piece (Op-Ed)

5 Hidden Risks in Retirement That Could Affect Your Financial Security

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Being well-prepared for retirement is wonderful, but there is no fail-safe plan. Things can unravel due to many inherent post-retirement risks. Understanding those risks that lie ahead and how they can harm financial security is key to making critical adjustments in a retirement plan. Sometimes without those changes, the impact of unfavorable and unpredictable events can be far more severe.

“Once you have a retirement plan in place, it’s not set in stone,” says Clayton Alexander (www.retireteton.com), an investment adviser and founder of Teton Wealth Group. “Things change. You may add or lose family members, your retirement goals may change, the economic environment may create new considerations, and financial innovations may present new strategies. Once per year is a minimum in terms of making sure your retirement plans (and beneficiaries) are constantly up-to-date.”

Alexander says retirees and those making retirement plans should be aware of these five risks:  

  • Longevity. Running out of money before they die is one of the primary concerns of most retirees. This worry is heightened by the fact that the average life expectancy has increased. “A pension or an annuity can lessen the risk, but carefully investigate any company where you’d place an annuity and be cautious of fees and interest rates,” Alexander says. “It’s best to tailor your plan to run to life expectancy plus five years.”
  • Loss of income. “Make sure both you and your spouse are protected from the unexpected,” Alexander says. “Consider the financial impact of the loss of one spouse. Remember that your surviving spouse will only get the highest of your two Social Security checks. A spouse’s death can bring additional financial burdens, including lingering medical bills and debts. Life insurance and estate planning are important vehicles to protect survivors.”
  • Health care costs. Longer life expectancy could lead to high costs in a long-term care facility. “It’s estimated that approximately 50% of people over 65 will need long-term care,” Alexander says. “Do not overspend on policies that may be subject to drastic premium increases. And surprising to some, Medicare is not free — your premiums for coverage are usually deducted from your Social Security check. Medicare doesn’t cover dental, hearing or vision, is subject to deductibles, and doesn’t cover long-term care. Long-term care insurance is advisable.”
  • Negative return risk. “A 50% gain does not allow a portfolio to recover from a 50% loss,” Alexander says. “In fact, a 100% gain is required to restore a 50% loss. The ‘buy and hold’ strategy that works when you are young — where you wait for the markets to come back up after a downturn — does not apply in retirement as we saw in 2008, when many people’s retirements were wiped out. Common stocks have substantially out-performed other investments over time and thus are usually recommended for retirees as part of a balanced asset allocation strategy, but the rate of return you earn can be significantly lower than the long-term trends.”
  • Inflation risk. “You should plan on prices for food, goods and services getting higher during retirement, reducing your buying power incrementally as you are living on a fixed income,” Alexander says. “Your retirement plan has to factor that in. Ways retirees can curb the effects of inflation include annuity products with a cost-of-living adjustment feature and investing in equities, a home, and other assets.”

“Understanding what the potential post-retirement risks are and considering them in the retirement planning stage,” Alexander says, “can help to ensure that they are mitigated and properly managed.”  

About Clayton Alexander Clayton Alexander (www.retireteton.com) is an investment adviser and founder of Teton Wealth Group. A graduate of Dixie State University with a B.A. in administration, Alexander also worked at Northwestern Mutual and Goldman Sachs. He is licensed for life and health insurance in the state of Utah and has passed the Series 65 securities exam. Alexander focuses on building holistic retirement plans, and with the launch of Teton Wealth he developed the four-step Ascent Plan – a system to help clients gain clarity and perspective on creating a financial plan for safe, secure and tax-efficient retirement income and estate transition.  

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Digm Piece (Op-Ed)

Are Americans Undervaluing Paid Time off + Quick Trip Tips

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It’s August, which for many Europeans means taking almost the entire month off. So why is it difficult for Americans to take even the little vacation time they receive? A recent piece in The Economist states workers in the U.S. are doing it all wrong by going on short holidays, which can add even more stress or taking none. Instead, it’s essential for employees to recharge their batteries. It’s also beneficial for companies to have a consistent holiday month during which junior employees can head to the beach, and managers can take stock of things, says the report.

While many Americans may not receive paid time off, especially those that only work part-time, even those who receive it generally don’t take all of it. What we don’t realize is that not taking a vacation is like giving money back to your employer, especially with companies that have a use it or lose it policy. Which should encourage employees to use their time but unfortunately it does not. According to recent polls conducted by Bankrate, nearly 2600 US adults say they plan to take a quarter of their vacation days while 4% are not planning to take any vacation time at all.

Time off is a valuable perk, to the tune of millions of dollars! Just to bring the point home in 2017 Americans gave up 212 million days off that amounts to $62.2 billion in lost benefits! So, take your vacations and follow the tips below to not break the bank while taking time off:

  1. Take a Staycation – Stay local and vacation somewhere that is less than a day drive away, this helps save gas, mileage, and spending on lodging. Look for local attractions, vineyards, interesting museums and landmarks or even travel to your closest big city and be a tourist for a day. You would be amazed at how much you can discover and learn by staying local and all on the cheap! It’s a bonus if you have friends in the town your visiting they can serve as a tour guide and let you stay over for free if they have the room.
  2. Book Flights Off-Season – July 4th, Memorial Day and Labor Day seem like a great time to go on vacation; unfortunately, everyone is planning to take time off during those busy weekends, and ticket prices are through the roof because of it. Book flights after major holidays and during the week you will generally find that they are cheaper than weekend flights.
  3. Take a Road Trip – Road trips are fun and cheaper than taking a plane, especially if you must rent a car when you get to your destination anyway. Plan cool stops along the way and finds interesting places to eat that way you can make the journey part of the vacation.
  4. Plan to Eat In – Food adds up on vacation so pack food and making one or two meals in your hotel can keep you under budget.
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Digm Piece (Op-Ed)

Top Ten Freshman Money Myths

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Starting college is one of the most important and exciting times of your life. Now that you’re all “checked-in,” enjoy your college experience without worrying about where your next meal will come from by chasing away these common freshman money myths. (more…)

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